Abbreviations I use in the post: PDH: Previous day’s high, PDL: Previous day’s low, IB: Initial Balance or First 1 hour range, NVD: Normal variation day (one of the market profile day types), OTD: open test drive, POC: Point of control, HVN (High volume node)
Observation from previous day:
On Friday, Banknifty opened just below PDL and responsive buyers tried to push prices up at the start and took prices near POC or HVN. Prices after testing IB high, consolidated inside IB range for sometime and at the end, broke on the downside below PDL and IB low, and closed at the bottom forming a NVD down day. This was the first day of May series and we can say prices were control of bears but we need to see if these sellers are able to follow through to the downside. As of now, this down move can only be considered as Inventory adjustment break (or pullback) in the higher timeframe but next 1-2 days are very crucial and if we continue moving down then things will change. So in case, buyers want to take prices up on higher timeframe, they need to provide support to the falling prices.
What can be expected now:
Similar to Nifty, we need to observe if the prices are accepted or rejected below PDL, which means that whether sellers are able to follow through to the downside with a good trade facilitation or now. Two things will be in favour of buyers – 1) Any rejection below PDL and prices back inside previous day’s range. 2) Poor trade facilitation by sellers.
31800- 32150 is a very important zone on downside. If prices accept below this zone and there is no support from buyers, they buying will become risky on the higher timeframe also.
PDH (33600) and PDL (32800) are the levels to watch out from previous day’s range. Above PDH, we can test swing high and below PDL, virgin POC (33530) and weak low (32150) are the levels to watch out for.
Trade plan for today:
Banknifty is expected to below previous day’s range and we can expect high volatility at open. So, I will ignore any open auction trade and will wait and see trade facilitation by sellers and the levels where price is getting accepted. There is no point looking for a long trade below PDL and later below IB low but we can look for a long trade at rejection of any of these levels only if price stays above 32150 , otherwise not. Also, only in case of good trade facilitation by sellers, we can look for short trades.
- Short trades are risky if prices above PDL or IB low.
- No long trade if prices trade below PDL or IB low.
- Banknifty and Nifty are both now moving in sync. We have seen sellers gaining control on first day of the new series. So, we need to carefully observe if sellers control continues for 1-2 more days or not. In case it continues, we can assume the buying we saw previous weak was not from a higher timeframe. In case it was, this down move can just be a pullback.
Please note that this is a personal view for learning , observational and education purpose and is not a trading recommendation. Trading futures carry a risk, so you should consult a financial expert before taking any risk. Also, Banknifty in above statements Indicate Banknifty future for current month and not Banknifty index.